KBR Announces Fourth Quarter and Fiscal 2020 Financial Results; Provides 2021 Guidance

KBR, Inc. (NYSE: KBR) today announced its fourth quarter and fiscal 2020 financial results and provided 2021 guidance.

Stuart Bradie, President and CEO of KBR, said, “2020 was a year of significant achievement for KBR, as we successfully advanced our long-term vision. We accelerated growth into attractive markets with the Centauri acquisition, strategically focused our commercial portfolio toward clean, sustainable solutions, and significantly advanced our corporate ESG and sustainability strategy, committing to net-zero carbon emissions by 2030 and achieving carbon neutrality in 2019. Throughout the year, our team of teams delivered outstanding safety and operational performance, generated healthy profit and superb cash flow, drove innovation with technology advances and expanded our footprint through new program wins. Our progress is underscored by the strong book-to-bill achieved by our Government and Sustainable Tech businesses that underpins the 2021 guidance we are announcing today. Looking ahead, I am confident KBR is well-positioned to continue driving growth and value for our stakeholders, and I would like to thank our 29,000 people for their perseverance, agility and teamwork through an unusual year.”

Summarized Fiscal 2020 and Fourth Quarter 2020 Financial Results 

In 2021, KBR updated the names of its businesses as follows:

• Government Solutions includes the following four business units: Defense & Intel, formerly the Defense Systems Engineering and Centauri businesses; Science & Space, formerly called Space & Mission Solutions; Readiness & Sustainment, formerly called Logistics; and International.
• Sustainable Technology Solutions, formerly called Technology Solutions, to better reflect our business portfolio of advanced technology and solutions that enable customers to achieve their important sustainability objectives.

Key Financial Highlights:

• Revenue of $5.8 billion increased $128 million from the prior year, as follows:
  • New program wins, on-contract expansion and acquisitive growth, including approximately $100 million, or 12%, growth in Science & Space; approximately $175 million, or 23%, growth in Defense and Intel (7% organic); and approximately $50 million growth in sustaining programs in Readiness & Sustainment;
  • Energy Solutions revenue volume increased $187 million primarily attributable to the completion of projects in backlog;
  • These revenue increases were partially offset by approximately $150 million of revenue associated with Tyndall Air Force Base disaster recovery work performed in 2019 that did not recur in 2020, reduced volume in KBR’s Middle East contingency work of approximately $150 million, reduced volume in the heritage Technology business of approximately $70 million primarily attributable to a higher mix of proprietary equipment deliveries in 2019 that did not recur in 2020, and reduced activity in the international government business of approximately $25 million.
• Selling, general and administrative expenses of $335 million declined $6 million compared to 2019, principally due to reductions associated with corporate cost control measures and travel restrictions related to COVID-19. These reductions were partially offset by increases in Government Solutions, including increased amortization attributable to our acquisition of Centauri, increased bid and proposal cost and favorable variances in 2019 that did not recur in 2020.
• Adjusted EBITDA of $478 million increased 2% from the prior year principally due to revenue growth.
• Interest expense of $83 million decreased $16 million compared to 2019 principally due to lower outstanding borrowings under KBR’s Senior Credit Facility during the majority of 2020 as well as lower weighted-average interest rates resulting from the favorable refinancing of KBR’s Senior Credit Facility in early 2020 and reduced market interest rates.
• Restructuring and impairment charges totaled $313 million and were primarily non-cash, were associated with KBR’s exit from commoditized services in its Energy Solutions business, and were related to lease abandonment, goodwill and asset impairments, and overhead reductions.
• Effective tax rate was 25%.

Recent Developments and New Business

• FY 2020 book-to-bill for Government Solutions was 1.2x, excluding privately financed initiatives, and was 1.4x for Sustainable Technology Solutions.
• Expanded footprint through new project/program wins, including a five year $539 million ceiling contract to provide high-end technical services for rapid prototyping and fielding of systems for the U.S. Air Force; over $900 million in IDIQ tasking through our IAC-MAC contract balanced nicely across the Army, Air Force and Navy; and an eight-year $974 million ceiling contract to provide sustaining services to support U.S. Air Force operations in Europe.
• Delivered a 95% recompete win rate in the U.S. Government Solutions business that included a $400 million NASA award to provide intelligent systems research and a $300 million U.S. Geological Survey award to perform satellite systems engineering, software development, cybersecurity, data storage, program management, network engineering, satellite data acquisition, and scientific research and application development for remote sensing data.
• Continued track record of innovation, bringing new technologies to market, including:
  • Entered into an agreement with Mura Technology to be the exclusive licensor of Cat-HTR, an innovative, disruptive mixed plastics recycling technology that processes all types of plastic including many that are currently considered unrecyclable; and
  • Entered into an agreement with Johnson Matthey to license a groundbreaking ammonia-methanol co-production process that combines KBR and Johnson Matthey market-leading ammonia and methanol technologies to enable superior end-product flexibility for our clients.
• Numerous engagements to consult, advise and deliver technology and professional services in the area of energy transition, hydrogen future and circular economy, including multiple engagements with various governments and companies to advise on climate change and transition to a hydrogen future; a five-year master services contract to provide engineering services for a client’s global carbon recycling technology projects; and a technology package, including license, basic engineering, proprietary equipment and catalyst, for a zero CO₂ emissions, commercial-scale ammonia facility.

Capital Deployment
KBR continues to employ a balanced approach to capital allocation, which includes investments that facilitate sustainable, long-term growth and prudent return of capital to shareholders. KBR’s financial strength positioned the company to complete the strategic acquisition of Centauri on October 1, 2020, repurchase approximately $50 million of its common stock in 2020, and increase its quarterly dividend to $0.10 per share, a 25% increase over 2019 levels.

FY 2021 Guidance
KBR expects its 2021 financial results to be as follows:

• Consolidated Revenue: $5.8 billion to $6.2 billion
• Adjusted EBITDA Margin: ~9%
• Effective Tax Rate: 25% to 26%
• Earnings per Share (EPS): $1.39 to $1.59
• Adjusted EPS: $2.00 to $2.20
• Operating Cash Flow (OCF): $250 million to $290 million
• Adjusted OCF: $280 million to $320 million

Conference Call Details
The company will host a conference call to discuss its fourth quarter and fiscal 2020 financial results on Monday, February 22, 2021 at 7:30 a.m. Central Time (8:30 a.m. Eastern Time). The conference call will be webcast simultaneously through the Investor Relations section of KBR’s website at investors.kbr.com. A replay of the webcast will be available shortly after the call on KBR’s website or by telephone at +1.719.457.0820, passcode: 3642827.